Under pressure to improve the school's performance and fast, Jack takes a huge gamble in recruiting optimistic, educational zealot Andrew Treneman.

Waterloo Road is in mourning after a fatal car crash that killed one of its pupils, Adam, and left another, Holly, in a coma.

Andrew implements a house system at the school to encourage feelings of pride and healthy competition, but when two of the biggest slackers in school get elected house captains, the kids group into gangs. Meanwhile, as Lorna's pregnancy continues driving her and Tom apart, she confides in Izzie that since Tom does not want the baby, she is going to have an abortion and fake a miscarriage.

When a fluffy bunny climbs onto the roof of Waterloo Road School, the pupils think it's hilarious. However, Izzie is mortified to discover that it is her unreliable ex-husband, Jimmy.

Lorna sexes up her image in a bid to win her husband back, but his attentions are definitely elsewhere. Meanwhile, authoritarian English teacher Grantly thinks a disruptive boy may be a drug addict, but kind-hearted Kim is determined to prove him wrong, and cheating teacher Steph fakes a break-in.

The future of the school is in jeopardy and is under threat of closure. A school trip to the museum descends into chaos and Tom and Izzie finally give in to their passion.